Bumper 8.5-pct GGR growth sparks better Dec estimates

Forecasts for the annual rate of growth in gross gaming revenue (GGR) in Macau’s casinos range from 6 percent to 15 percent this month – a significant improvement over last year’s figure.

The forward-looking estimates for December were issued by at least five stockbrokers after the release of last month’s GGR figure. On Saturday, the Macau government’s Gaming Inspection and Coordination Bureau said the city’s casinos raked in nearly MOP25 billion (US$3.1 billion) in November. That represented growth of 8.5 percent compared to November 2017 and easily beat the consensus figure of about 4 percent growth published by the Bloomberg news agency.

Deutsche Bank Securities Inc said the result was a “pleasant upside surprise”. Last month’s strong result has seen a number of upward revisions for December from some stockbrokers offering Macau coverage.

The largest estimate for December’s annual GGR growth is between 10 percent and 15 percent, offered by Instinet LLC. “Assuming December GGR per day is flat sequentially versus the average in November, we estimate GGR for the month will be around MOP25 billion to MOP26 billion,” said the stockbroking arm of the Japanese investment bank Nomura.

The stockbroking arm of investment bank JP Morgan expects GGR in Macau casinos this month to be at least 10 percent greater than a year ago. “Good news is comps will be relatively easy for December, and we expect the month to print plus 9 percent to 11 percent year-on-year in GGR (based on conservative MOP800 million to MOP810 million per day average daily revenue),” the JP Morgan memo said.

The brokerage’s Hong Kong-based analysts DS Kim and Sean Zhuang said they remain “constructive” on Macau’s gaming stocks, and they predict a broad recovery in earnings before interest, taxation, depreciation and amortisation after two quarters of decline.

Deutsche Bank sees GGR at 8.5 percent higher this month than a year ago in view of what the stockbroker thinks was some influence from high hold last month, and the low base for comparison.

“Over the last six years, December win per day has been about 2.6 percent better than the win per day in November. Given the November result (US$104.3 million win per day), this math would imply a win per day in December of about US$107 million and a full-month result of about US$3.316 billion, up 16.7 percent year-on-year, and a two-year stack comparison of plus 33.7 percent,” stated the Deutsche Bank Securities note.

Brokerage Sanford C. Bernstein estimates that GGR this month will be between 6 percent and 8 percent greater than a year ago. Casino revenue in December last year was nearly MOP22.7 billion.

The Sanford Bernstein note remarked on the low base for comparison last year. saying: “VIP in December 2017 was relatively weak, with low hold and soft volumes. Game play last year was impacted by more overseas business going overseas (i.e. Australia) as well as some slowdown due to issues at a large Guangdong underground bank.” The state of the mainland Chinese economy is holding back GGR growth in Macau, the stockbroker added.

“The December calendar is unfavourable, with one fewer Friday,” Mr Govertsen wrote. “Looking ahead to the first quarter of 2019, we expect a slow start to the year, with the whole of the first quarter of 2019 at plus 3 percent, before picking up into the mid-single-digits post-first-quarter.”

“We remain comfortable with our mid-single-digit forecast in GGR next year (or roughly a GDP scenario), with mass outpacing VIP.”

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